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Postretirement benefits other than pensions
 12 Months Ended
Dec. 25, 2011
Pension Plans, Defined Benefit
  
Postretirement benefits other than pensions

NOTE 8

Retirement plans

The company and its subsidiaries have various retirement plans, including plans established under collective bargaining agreements. The company’s principal retirement plan is the Gannett Retirement Plan (GRP). As described more fully below, substantially all participants had their benefits under this plan frozen effective Aug. 1, 2008. Prior to this, benefits under the GRP were generally based on years of service and final average pay.

The disclosure tables below also include the assets and obligations of the Newsquest Pension Scheme in the U.K., Newspaper Guild of Detroit Pension Plan, the Gannett Supplemental Retirement Plan (SERP) and a frozen plan for the company’s Board of Directors. The company uses a Dec. 31 measurement date for its retirement plans.

In June 2008, the Board of Directors approved amendments to each of (i) the GRP; (ii) the SERP; (iii) the Gannett 401(k) Savings Plan (401(k) Plan); and (iv) the Gannett Deferred Compensation Plan (DCP). The amendments were designed to improve the 401(k) Plan while reducing the amount and volatility of future pension expense. As a result of the amendments to the GRP and SERP, most participants in these plans had their benefits frozen as of Aug. 1, 2008. Participants whose GRP and, if applicable, SERP benefits were frozen will have their frozen benefits periodically increased by a cost of living adjustment until benefits commence.

Effective Aug. 1, 2008, most participants whose benefits were frozen under the GRP and, if applicable, the SERP received higher matching contributions under the 401(k) Plan. The matching contribution rate generally increased from 50% of the first 6% of compensation that an employee elects to contribute to the plan to 100% of the first 5% of contributed compensation. The company also makes additional employer contributions to the 401(k) Plan on behalf of certain long-service employees. The DCP was amended to provide for Gannett contributions on behalf of certain employees whose benefits under the 401(k) Plan are capped by IRS rules.

In 2009, the company reached an agreement with one of its unions for a complete withdrawal from the union’s underfunded pension plan and release from any future obligations with respect thereto. Under the agreement, the company made settlement payments of $7.3 million in May 2009 and $7.7 million in May 2010. As a result of this agreement, the company recognized a pre-tax settlement gain of $39.8 million in 2009.

In October 2010, after discussion with its pension plan trustees and employees, the decision was made to freeze its Newsquest defined benefit plan to future accrual, effective March 31, 2011. The plan closure was made to reduce pension expense and funding volatility and was part of a package of measures to address the plan’s deficit. The company recognized a pre-tax curtailment gain of $3.3 million in 2010 in connection with this closure.

 

The company’s pension costs, which include costs for its qualified, non-qualified and union plans, are presented in the following table:

 

September 30, September 30, September 30,

In thousands of dollars

      2011      2010      2009  

Service cost—benefits earned during the period

      $ 7,833       $ 14,829       $ 14,439   

Interest cost on benefit obligation

        171,339         176,738         178,646   

Expected return on plan assets

        (211,659 )       (191,614 )       (171,472 ) 

Amortization of prior service costs

        .7,580         6,731         1,641   

Amortization of actuarial loss

        37,901         46,870         48,541   
    

 

 

     

 

 

     

 

 

  

Pension expense for company-sponsored retirement plans

        12,994         53,554         71,795   

Curtailment gains

        —           (3,840 )       —     

Settlement and special termination benefit charge/(credit)

        1,068         —           (39,159 ) 

Union and other pension cost

        4,426         3,990         5,146   
    

 

 

     

 

 

     

 

 

  

Total pension cost (benefit)

      $ 18,488       $ 53,704       $ 37,782   
    

 

 

     

 

 

     

 

 

  

The following table provides a reconciliation of pension benefit obligations (on a projected benefit obligation measurement basis), plan assets and funded status of company-sponsored retirement plans, along with the related amounts that are recognized in the Consolidated Balance Sheets.

 

September 30, September 30,

In thousands of dollars

      Dec. 25, 2011      Dec. 26, 2010  

Change in benefit obligations

        

Benefit obligations at beginning of year

      $ 3,217,877       $ 3,088,364   

Service cost

        7,833         14,829   

Interest cost

        171,339         176,738   

Plan amendments

        1,297         —     

Plan participants’ contributions

        3,885         7,595   

Actuarial loss

        182,789         189,382   

Foreign currency translation

        5,740         (24,259 ) 

Gross benefits paid

        (240,334 )       (218,362 ) 

Special termination benefit

        1,068         —     

Curtailments

        —           (16,410 ) 

Benefit obligations at end of year

      $ 3,351,494       $ 3,217,877   
    

 

 

     

 

 

  

Change in plan assets

        

Fair value of plan assets at beginning of year

      $ 2,588,728       $ 2,375,767   

Actual return on plan assets

        (6,537 )       269,263   

Plan participants’ contributions

        3,885         7,595   

Employer contributions

        56,392         174,578   

Gross benefits paid

        (240,334 )       (218,362 ) 

Foreign currency translation

        6,634         (20,113 ) 

Fair value of plan assets at end of year

      $ 2,408,768       $ 2,588,728   
    

 

 

     

 

 

  

Funded status at end of year

      $ (942,726 )     $ (629,149 ) 
    

 

 

     

 

 

  

Amounts recognized in Consolidated Balance Sheets

        

Long-term other assets

      $ —         $ 4,140   

Accrued benefit cost—current

      $ (34,616 )     $ (13,949 ) 

Accrued benefit cost—long-term

      $ (908,110 )     $ (619,340 ) 
    

 

 

     

 

 

  

The funded status (on a projected benefit obligation basis) of the company’s principal retirement plans at Dec. 25, 2011, is as follows:

 

 

September 30, September 30, September 30,

In thousands of dollars

      Fair Value of
Plan Assets		        Benefit
Obligation		        Funded
Status		  

GRP

      $ 1,775,478         $ 2,335,648         $ (560,170 ) 

SERP

        —             215,646           (215,646 ) 

Newsquest

        560,642           713,969           (153,327 ) 

All other

        72,648           86,231           (13,583 ) 
    

 

 

       

 

 

       

 

 

  

Total

      $ 2,408,768         $ 3,351,494         $ (942,726 ) 
    

 

 

       

 

 

       

 

 

  

The accumulated benefit obligation for all defined benefit pension plans was $3.32 billion and $3.19 billion at Dec. 25, 2011 and Dec. 26, 2010, respectively.

Net actuarial losses recognized in accumulated other comprehensive loss were $1.53 billion as of Dec. 25, 2011 and $1.17 billion in as of Dec. 26, 2010. Prior service cost recognized in accumulated other comprehensive loss was $69.0 million in 2011 and $75.3 million in 2010.

The actuarial loss and prior service cost amounts expected to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2012 are $53.2 million and $7.7 million, respectively.

Other changes in plan assets and benefit obligations recognized in other comprehensive income for 2011 consist of the following:

 

September 30,

In thousands of dollars

         

Current year actuarial loss

      $ (400,985 ) 

Amortization of actuarial loss

        37,901   

Amortization of prior service costs

        7,580   

Change in prior service costs

        (1,297 ) 

Currency loss

        (286 ) 
    

 

 

  

Total

      $ (357,087 ) 
    

 

 

  

Pension costs: The following assumptions were used to determine net pension costs:

 

September 30, September 30, September 30,
       2011     2010     2009  

Discount rate

        5.49 %      5.88 %      6.26 % 

Expected return on plan assets

        8.75 %      8.75 %      8.75 % 

Rate of compensation increase

        2.95 %      2.88 %      2.54 % 

The expected return on asset assumption was determined based on plan asset allocations, a review of historic capital market performance, historical plan asset performance and a forecast of expected future asset returns.

 

Benefit obligations and funded status: The following assumptions were used to determine the year-end benefit obligations:

 

September 30, September 30,
       Dec. 25, 2011     Dec. 26, 2010  

Discount rate

        4.86 %      5.49 % 

Rate of compensation increase

        2.96 %      2.95 % 

The following table presents information for those company retirement plans for which the accumulated benefit obligation exceeds assets:

 

September 30, September 30,

In thousands of dollars

      Dec. 25, 2011        Dec. 26, 2010  

Accumulated benefit obligation

      $ 3,324,133         $ 3,123,535   

Fair value of plan assets

      $ 2,408,768         $ 2,514,939   

The following table presents information for those company retirement plans for which the projected benefit obligation exceeds assets:

 

September 30, September 30,

In thousands of dollars

      Dec. 25, 2011        Dec. 26, 2010  

Projected benefit obligation

      $ 3,351,494         $ 3,148,228   

Fair value of plan assets

      $ 2,408,768         $ 2,514,939   

During 2011, the company made contributions of $33 million to the GRP. The company contributed $3.9 million to the U.K. retirement plan in 2011. Early in fiscal year 2012, the company contributed $54 million to the GRP. The company expects to contribute up to an additional $64 million to the GRP during 2012, depending on final actuarial valuation results, and $5 million to the U.K. retirement plan.

Plan assets: The fair value of plan assets was approximately $2.4 billion and $2.6 billion at the end of 2011 and 2010, respectively. The expected long-term rate of return on these assets was 8.75% for 2011, 2010 and 2009. The asset allocation for the GRP at the end of 2011 and 2010, and target allocations for 2012, by asset category, are presented in the table below:

 

September 30, September 30, September 30,
       Target Allocation     Allocation of Plan Assets  
       2012     2011     2010  

Equity securities

        47 %      46 %      42 % 

Debt securities

        35        39        44   

Other

        18        15        14   
    

 

 

    

 

 

    

 

 

  

Total

        100 %      100 %      100 % 
    

 

 

    

 

 

    

 

 

  

The primary objective of company-sponsored retirement plans is to provide eligible employees with scheduled pension benefits: the “prudent man” guideline is followed with regard to the investment management of retirement plan assets. Consistent with prudent standards for preservation of capital and maintenance of liquidity, the goal is to earn the highest possible total rate of return while minimizing risk. The principal means of reducing volatility and exercising prudent investment judgment is diversification by asset class and by investment manager; consequently, portfolios are constructed to attain prudent diversification in the total portfolio, each asset class, and within each individual investment manager’s portfolio. Investment diversification is consistent with the intent to minimize the risk of large losses. All objectives are based upon an investment horizon spanning five years so that interim market fluctuations can be viewed with the appropriate perspective. The target asset allocation represents the long-term perspective. Retirement plan assets will be rebalanced periodically to align them with the target asset allocations. Risk characteristics are measured and compared with an appropriate benchmark quarterly; periodic reviews are made of the investment objectives and the investment managers. The company’s actual investment return on its Gannett Retirement Plan assets was 0.4% for 2011, 14.0% for 2010 and 25.6% for 2009.

Retirement plan assets include approximately 1.2 million shares of the company’s common stock valued at approximately $17 million and $19 million at the end of 2011 and 2010, respectively. The plan received dividends of approximately $248,000 on these shares in 2011.

Cash flows: The company estimates it will make the following benefit payments (from either retirement plan assets or directly from company funds), which reflect expected future service, as appropriate:

 

September 30,

In thousands of dollars

         

2012

      $ 231,381   

2013

      $ 213,052   

2014

      $ 219,135   

2015

      $ 220,640   

2016

      $ 221,693   

2017-2021

      $ 1,116,070   

 

Multi-employer plans that provide pension benefits: The company contributes to a number of multi-employer defined benefit pension plans under the terms of collective-bargaining agreements (CBA) that cover its union-represented employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:

 

  •  

The company plays no part in the management of plan investments or any other aspect of plan administration.

 

  •  

Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

 

  •  

If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

 

  •  

If the company chooses to stop participating in some of its multi-employer plans, the company may be required to pay those plans an amount based on the unfunded status of the plan, referred to as withdrawal liability.

The company’s participation in these plans for the annual period ended Dec. 31, 2011, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN) and the three-digit plan number. Unless otherwise noted, the two most recent Pension Protection Act (PPA) zone statuses available are for the plan’s year-end at Dec. 31, 2011 and Dec. 31, 2010, respectively. The zone status is based on information that the company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65% funded; plans in the orange zone are both a) less than 80% funded and b) have an accumulated/expected funding deficiency in any of the next six plan years, net of any amortization extensions; plans in the yellow zone meet either one of the criteria mentioned in the orange zone; and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreement(s) to which the plans are subject.

The company makes all required contributions to these plans as determined under the respective CBAs. For each of the plans listed below, Gannett’s contribution represented less than 5% of total contributions to the plan.

The company incurred expenses for multi-employer withdrawal liabilities of $30 million, $4 million and $4 million in 2011, 2010, and 2009, respectively. Other long-term liabilities on the Consolidated Balance Sheet as of Dec. 25, 2011 and Dec. 26, 2010 include $42 million and $12 million, respectively, for such withdrawal liabilities. For plans representing $27 million of the total, the actual withdrawal liabilities will not be known until 2013 or 2014 and no payments will be required until such determinations are made. Expenses and liabilities recorded by the company for the plans in 2011 were substantially higher than in previous years. The costs and liabilities recorded in 2011, $27 million, primarily relate to withdrawal liabilities triggered upon the company’s decision in December 2011 to cease production activities at its Cincinnati publishing operations and transition them to a non-Gannett publisher in Columbus, OH. Further withdrawal liabilities of this magnitude are not anticipated in 2012.

Multi-employer Pension Plans

 

          Zone Status   FIP/RP
Status		   Contributions            
    EIN Number/     Dec. 31,   Pending/   (in thousands)     Surcharge   Expiration  

Pension Plan Name

   Plan Number     2011   2010   Implemented   2011     2010     2009     Imposed   Dates of CBAs  

AFTRA Retirement Plan (a)

     13-6414972/001      Green

as of

Nov.
30,

2010

   Green

as of

Nov.
30

2009

   n/a   $ 896      $ 858      $ 842      n/a    

 

 

 5/3/2011

7/13/2012

6/30/2013

   

  

  

CWA/ITU Negotiated Pension Plan

     13-6212879/001      Red   Red   Implemented     146        169        186      No    
 		 11/8/2010-
2/1/2013		   
  

GCIU—Employer Retirement Benefit Plan (a)

     91-6024903/001      Red   Red   Implemented     280        331        480      No    
 		 6/21/2010-
8/31/2013		   
  

The Newspaper Guild International Pension Plan (a)

     52-1082662/001      Red   Red   Implemented     385        392        498      No     11/13/2012   

IAM National Pension Plan (a)

     51-6031295/002      Green   Green   n/a     308        315        361      n/a     4/30/2013   

Teamsters Pension Trust Fund of Philadelphia and Vicinity (a)

     23-1511735/001      Yellow   Orange   Implemented     1,054        995        1,011      n/a    
 		 11/13/2012-
3/13/2013		   
  

Central Pension Fund of the International Union of Operating Engineers and Participating Employers (a)

     36-6052390/001      Green
as of
Jan.
31,
2012		   Green
as of
Jan.
31,
2011		   n/a     163        166        158      n/a     4/30/2013   

Central States Southeast and Southwest Areas Pension Fund

     36-6044243/001      Red   Red   Implemented     372        343        308      No     10/1/2012   
         

 

 

    

 

 

    

 

 

      

Total

           $ 3,604      $ 3,569      $ 3,844       
         

 

 

    

 

 

    

 

 

      

 

(a) This plan has elected to utilize special amortization provisions provided under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010.
Other Postretirement Benefit Plans, Defined Benefit
  
Postretirement benefits other than pensions

NOTE 9

Postretirement benefits other than pensions

The company provides health care and life insurance benefits to certain retired employees who meet age and service requirements. Most of the company’s retirees contribute to the cost of these benefits and retiree contributions are increased as actual benefit costs increase. The cost of providing retiree health care and life insurance benefits is actuarially determined and accrued over the service period of the active employee group. The company’s policy is to fund benefits as claims and premiums are paid. The company uses a Dec. 31 measurement date for these plans.

Postretirement benefit cost for health care and life insurance included the following components:

 

September 30, September 30, September 30,

In thousands of dollars

      2011      2010      2009  

Service cost — benefits earned during the period

      $ 611       $ 713       $ 1,405   

Interest cost on net benefit obligation

        9,205         10,606         13,339   

Amortization of prior service credit

        (19,510 )       (19,377 )       (15,689 ) 

Amortization of actuarial loss

        5,444         4,949         4,695   
    

 

 

     

 

 

     

 

 

  

Net periodic postretirement (benefit) cost

      $ (4,250 )     $ (3,109 )     $ 3,750   
    

 

 

     

 

 

     

 

 

  

The table below provides a reconciliation of benefit obligations and funded status of the company’s postretirement benefit plans:

 

September 30, September 30,

In thousands of dollars

      Dec. 25, 2011      Dec. 26, 2010  

Change in benefit obligations

        

Net benefit obligations at beginning of year

      $ 191,282       $ 208,213   

Service cost

        611         713   

Interest cost

        9,205         10,606   

Plan participants’ contributions

        10,896         11,708   

Plan amendments

        —           (677 ) 

Actuarial gain (loss)

        2,482         (6,121 ) 

Gross benefits paid

        (32,386 )       (35,658 ) 

Federal subsidy on benefits paid

        2,041         2,498   

Net benefit obligations at end of year

      $ 184,131       $ 191,282   
    

 

 

     

 

 

  

Change in plan assets

        

Fair value of plan assets at beginning of year

      $ —         $ —     

Employer contributions

        21,490         23,950   

Plan participants’ contributions

        10,896         11,708   

Gross benefits paid

        (32,386 )       (35,658 ) 

Fair value of plan assets at end of year

      $ —         $ —     
    

 

 

     

 

 

  

Benefit obligation at end of year

      $ 184,131       $ 191,282   
    

 

 

     

 

 

  

Accrued postretirement benefit cost:

        

Current

      $ 20,432       $ 22,960   

Noncurrent

      $ 163,699       $ 168,322   

Net actuarial losses recognized in accumulated other comprehensive loss were $30.8 million in 2011 and $33.7 million in 2010. Prior service credits recognized in accumulated other comprehensive loss were $44.1 million as of Dec. 25, 2011 and $63.6 million as of Dec. 26, 2010.

The actuarial loss and prior service credit estimated to be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2012 are $5.3 million and $(19.2) million, respectively.

Other changes in plan assets and benefit obligations recognized in other comprehensive (loss) income for 2011 consist of the following:

 

September 30,

In thousands of dollars

         

Current year actuarial loss

      $ (2,510 ) 

Prior service credit change

        —     

Amortization of actuarial loss

        5,444   

Amortization of prior service credit

        (19,510 ) 
    

 

 

  

Total

      $ (16,576 ) 
    

 

 

  

Postretirement benefit costs: The following assumptions were used to determine postretirement benefit cost:

 

September 30, September 30, September 30,
       2011     2010     2009  

Discount rate

        5.30 %      5.80 %      6.15 % 

Health care cost trend on coverage

        6.50 %      6.50 %      7.00 % 

Ultimate trend rate

        5.00 %      5.00 %      5.00 % 

Year that ultimate trend rate is reached

        2015        2014        2014   

Benefit obligations and funded status: The following assumptions were used to determine the year-end benefit obligation:

 

September 30, September 30,
       Dec. 25, 2011     Dec. 26, 2010  

Discount rate

        4.75 %      5.30 % 

Health care cost trend rate assumed for next year

        6.50 %      6.50 % 

Ultimate trend rate

        5.00 %      5.00 % 

Year that ultimate trend rate is reached

        2015        2014   

A 6.50% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2012. Assumed health care cost trend rates have an effect on the amounts reported for the health care plans. The effect of a 1% change in the health care cost trend rate would result in a change of approximately $7.5 million in the 2011 postretirement benefit obligation and a $0.4 million change in the aggregate service and interest components of the 2011 expense.

Cash flows: The company expects to make the following benefit payments, which reflect expected future service, and to receive the following federal subsidy benefits as appropriate:

 

September 30, September 30,

In thousands of dollars

      Benefit Payments        Subsidy Benefits  

2012

      $ 20,431         $ 2,078   

2013

      $ 20,035         $ 2,057   

2014

      $ 19,695         $ 2,043   

2015

      $ 18,887         $ 2,000   

2016

      $ 17,848         $ 1,953   

2017-2021

      $ 73,018         $ 8,715   

The amounts above exclude the participants’ share of the benefit cost. The company’s policy is to fund benefits as claims and premiums are paid.